U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
__ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______ .
Commission File No. 0-27780
U-SHIP, INC.
(Exact name of registrant as specified in its charter)
Utah 39-173181
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
5583 West 78th Street, Edina, MN 55439
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (612) 941-4080
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES (X) NO ( )
As of January 31, 1997 the issuer had outstanding 4,016,564 shares of common
stock, $.004 par value.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
U-SHIP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of
December 31, June 30,
1996 1996
----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,493,645 $ 4,822,785
Accounts receivable 137,892 59,135
Prepaid expenses 85,264 12,208
Inventories 904,618 822,393
----------- -----------
Total current assets 2,621,419 5,716,521
----------- -----------
PROPERTY AND EQUIPMENT:
Shipping centers 535,586 87,045
Furniture, fixtures and equipment 477,694 365,003
Less-Accumulated depreciation (311,411) (230,704)
----------- -----------
Total property and equipment, net 701,869 221,344
----------- -----------
Other assets. Net 116,045 76,964
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$ 3,439,333 $ 6,014,829
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 39,421 $ 28,173
Checks issued not yet presented for payment - 1,851,365
Deferred Revenue 183,144 419,702
Accounts payable 340,843 194,227
Accrued liabilities 214,174 250,353
----------- -----------
Total current liabilities 777,582 2,743,820
----------- -----------
Long-term debt, net of current maturities 71,542 30,263
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $.004 par value; 25,000,000 shares authorized;
none issued and outstanding - -
Common stock, $.004 par value; 75,000,000 shares authorized;
4,016,564 and 3,916,564 issued and outstanding 16,066 15,666
Additional paid-in capital 8,849,063 8,548,875
Warrants 19,500 19,500
Accumulated deficit (6,294,420) (5,343,295)
----------- -----------
Shareholders' equity 2,590,209 3,240,746
----------- -----------
$ 3,439,333 $ 6,014,829
=========== ===========
</TABLE>
See accompanying notes which are an integral part of these balance sheets.
<TABLE>
<CAPTION>
U-SHIP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
------------------------------ -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Package shipping revenue $ 191,196 $ 189,028 $ 321,560 $ 250,248
Machine sales revenue 51,085 62,718 112,632 110,186
Other revenue 13,528 2,383 18,403 5,976
----------- ----------- ----------- -----------
Net sales 255,809 254,129 452,595 366,410
Cost of goods sold (204,543) (217,024) (375,068) (302,190)
----------- ----------- ----------- -----------
Gross profit 51,266 37,105 77,527 64,220
General and administrative 424,214 250,293 688,388 399,301
Marketing and sales 110,628 50,908 263,098 118,413
Research and development 73,589 43,203 137,999 92,104
----------- ----------- ----------- -----------
Loss from operations (557,165) (307,299) (1,011,958) (545,598)
Interest income (21,219) (1,043) (66,669) (1,043)
Interest expense 3,097 46,949 5,836 87,422
----------- ----------- ----------- -----------
Net loss $ (539,043) $ (353,205) $ (951,125) $ (631,977)
=========== =========== =========== ===========
Net loss per share $ (0.13) $ (0.17) $ (0.24) $ (0.32)
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding 4,016,573 2,062,281 4,015,486 2,002,045
=========== =========== =========== ===========
</TABLE>
See accompanying notes which are an integral part of these consolidated
statements.
<TABLE>
<CAPTION>
U-SHIP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
Six Months Ended December 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (951,125) $ (631,977)
Adjustments to reconcile net loss to net cash flows used for
operating activities-
Depreciation and amortization 121,700 62,191
Reserve for doubtful accounts (2,254) -
Reserve for inventory (22,000) -
Debt issuance costs - (141,327)
(Gain)/Loss on retirement of equipment 4,312 -
Change in current operating items:
Checks held, not yet presented for payment (1,851,365) -
Accounts receivable (76,504) (94,522)
Inventories (60,225) (50,836)
Prepaid expenses and other (73,056) (6,336)
Accounts payable 146,616 (213,612)
Accrued liabilities and deferred revenue (272,736) 214,637
----------- -----------
Cash used for operating activities (3,036,637) (861,782)
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (645,618) (10,644)
----------- -----------
Cash used for investing activities (645,618) (10,644)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 77,048 2,145,894
Payments on notes payable and long-term debt (24,521) (46,554)
Sale of common stock 300,588 103,000
Cancellation of shares - (5)
----------- -----------
Cash provided by financing activities 353,115 2,202,335
----------- -----------
Net decrease in cash and cash equivalents (3,329,140) 1,329,909
Cash and cash equivalents, beginning of period 4,822,785 41,853
----------- -----------
Cash and cash equivalents, end of period $ 1,493,645 $ 1,371,762
=========== ===========
</TABLE>
See accompanying notes which are an integral part of these consolidated
statements.
U-SHIP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by U-Ship, Inc. which, together with its wholly-owned subsidiaries,
shall be referred to herein as "U-Ship" or the "Company," without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Company's business is seasonal and, accordingly, interim results are not
indicative of results for a full year. In the opinion of the Company, all
adjustments consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of December 31, 1996,
and the results of its operations for the three and six month periods ended
December 31, 1996 and 1995, have been included. Certain information in footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these consolidated financial statements be read in conjunction
with the financial statements for the year ended June 30, 1996, and the
footnotes thereto, included in the Company's Form 10-KSB, filed with the
Securities and Exchange Commission on September 26, 1996.
1. Basis of Presentation:
Principles of consolidation - The consolidated financial statements include the
accounts of U-Ship, Inc. and its wholly owned subsidiaries. All inter-Company
balances and transactions have been eliminated in the consolidation.
2. Inventories:
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. Inventories consist of shipping systems in various stages of completion,
including component parts. The components of inventory are:
December 31, June 30,
1996 1996
--------- ----------
(unaudited)
Raw materials and work components $ 688,955 $ 490,342
Finished goods 215,663 332,051
--------- ----------
$ 904,618 $ 822,393
========= ==========
3. Revenue Recognition:
The Company has historically generated revenue from two primary sources: the per
package shipping revenue generated from ongoing shipping volume and the sale of
automated shipping centers. Revenues are also derived, to a lesser extent, from
the sale of shipping supplies and maintenance contracts.
Package shipping revenue is recognized when the package is shipped. Revenue from
maintenance contracts is deferred and recognized over the period of the related
agreement.
The Company generally recognizes revenue from sales of shipping systems upon
delivery and installation. Certain sales agreements allow the customer to return
the shipping system under certain circumstances within the first 12 months. Such
revenue and related costs are deferred until the return rights lapse and certain
other conditions are met.
The components of deferred revenue are as follows:
December 31, June 30,
1996 1996
--------- ----------
(unaudited)
Machine sales $ 131,386 $ 313,496
Maintenance contracts 51,758 106,206
--------- ----------
$ 183,144 $ 419,702
========= ==========
Most of the automated shipping center sales are financed by third-party
equipment lessors. The lessor has certain recourse to the Company in the event
of customer default or return of the automated shipping center, primarily to
re-market the automated shipping center on a best efforts basis. The Company has
reserved the estimated cost of fulfilling such recourse arrangements.
The Company has discontinued outright sales of shipping systems and revenues
from shipping systems sales is expected to decrease in future periods.
4. Supplemental Cash Flow Information:
The following table provides supplemental cash flow information for the
respective six month period ended:
December 31, December 31,
1996 1995
----------- -----------
Non Cash Transactions:
Conversion of debt to common stock $ 1,095,000
Conversion of payable to common stock 164,670
Cash paid during the period for:
Interest $ 5,836 $ 87,422
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
U-SHIP, INC. AND SUBSIDIARIES
THE FOLLOWING DISCUSSION CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH MAY BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "EXPECT," "ANTICIPATE,"
"ESTIMATE," "GOAL," "CONTINUE," OR OTHER COMPARABLE TERMINOLOGY. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES RELATING TO THE COMPANY'S FUTURE
PERFORMANCE. ACTUAL RESULTS OR EVENTS MAY MATERIALLY DIFFER FROM THOSE INDICATED
IN SUCH FORWARD-LOOKING STATEMENTS. IN EVALUATING SUCH STATEMENTS, SHAREHOLDERS
AND PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS AND ARE SPECIFICALLY DIRECTED TO REVIEW THE VARIOUS
FACTORS IDENTIFIED UNDER THE CAPTION "CAUTIONARY FACTORS" WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING
STATEMENTS.
GENERAL
As of December 31, 1996, the Company had 196 Automated Shipping
Centers(TM) ("ASCs") operating in 35 states and 4 Canadian provinces. The first
ASC was placed in service in November 1994. The Company has evolved from a
product and technology company selling a shipping product into a service company
offering quality shipping services through the use of technology. The Company's
focus has shifted from selling ASCs to placing ASCs in service in strategic
retail locations at the Company's expense and operating them to maximize the
Company's revenue. Under this plan, the Company continues to pay a percentage of
package shipping revenue to the retail location where the ASC is placed, but the
Company retains a greater share of the shipping revenue.
A key part of the Company's strategy is to select targeted locations
for its ASCs. The Company is now concentrating on placing ASCs in locations that
have already established a shipping service. By concentrating on existing
shipping sites, the Company believes that it can better reach its target
markets, the small office and home office markets. The Company believes that
small business and home office shippers are frequent shippers, and are more
likely to use premium shipping services, such as next day delivery, which
provide a higher profit margin to the Company. By placing machines in locations
where consumers are already going for shipping services, the Company believes
that it will be able to capture these frequent shippers without incurring the
significant expense of a consumer marketing program. In addition, such locations
are already processing a high volume of packages and will get the greatest
benefit from the automation that U-Ship provides.
In September 1996, the Company entered into an agreement with Kinko's,
Inc. ("Kinko's") to install up to 250 ASCs by December 1997 (the "Kinko's
Agreement"). The Kinko's Agreement provides that Kinko's will use its best
efforts to provide the Company with the opportunity to install ASCs in up to 250
Kinko's stores by December 31, 1997. Pursuant to the Kinko's Agreement, each
installation shall remain in operation for a period of three years from the date
of installation, subject to certain contingencies. Under the Kinko's Agreement,
the Company will retain ownership of the ASCs installed at the Kinko's sites,
and package shipping revenue generated at each site will be shared between the
Company and Kinko's.
In October 1996, the Company entered into an agreement with OfficeMax,
Inc. ("OfficeMax") to install 73 ASCs by the end of January 1997 (the "OfficeMax
Agreement"). The OfficeMax Agreement provides that each installation shall
remain in operation for a minimum period of three years from the date of
installation. The Company will retain ownership of the ASCs installed at the
OfficeMax sites, and package shipping revenue generated at each site will be
shared between the Company and OfficeMax.
RESULTS OF OPERATIONS
Package shipping revenue for the three months ended December 31, 1996,
increased $2,168 or 1% to $191,196, from $189,028 for the same period in 1995.
Net sales for the three months ended December 31, 1996, increased $1,680 or 1%
to $255,809 from $254,129 for the same period in 1995. The increase in package
shipping revenue is the result of the higher number of ASC locations offset by a
short term loss of package volume resulting from returns of various pieces of
old leased equipment. New ASC units take a number of months to reach their
expected on-going volume. As a result, the increase in package volume does not
reflect the expected full impact of the increase in number of ASC locations from
137 active units as of December 31, 1995 to 196 active units at the end of
December 31, 1996. The Company has placed 111 ASCs at retail locations during
the last 12 months and taken back 52 old leased units. Of the increase in the
number of ASCs between the two periods, 56 of the units were placed in service
during the last two months of the quarter.
Package shipping revenue for the six month period ended December 31,
1996, increased $71,312 or 28% to $321,560, from $250,248 for the same period in
1995. Net sales for the six month period ended December 31, 1996, increased
$86,185 or 24% to $452,595 from $366,410 for the same period in 1995. These
increases are due primarily to the Company's increasing the number of locations
at which ASCs are placed and building recurring revenue through increased
package shipping revenue. The Company expects package shipping revenues to
generate future revenue growth thereby reflecting its strategy to own and
operate ASCs and generate package shipping revenues, and decrease dependence on
selling ASC equipment.
Gross margins increased by $14,161 or 38% to $51,266 for the three
month period ended December 31, 1996, from $37,105 for the same period in 1995.
For the six month period ended December 31, 1996, gross margins increased by
$13,307 or 21% to $77,527, from $64,220 for the corresponding six month period
from the prior year. Gross margins as a percent of sales have increased from 17%
in the first quarter of 1996 to 20% in the second quarter primarily due to the
increase in package shipping volume. The Company expects gross margins to
continue to increase as a greater proportion of its revenues are derived from
package shipping.
General and administrative expenses for the three months ended December
31, 1996, increased $173,921 or 69% to $424,214 from $250,293. Personnel
expenses accounted for $51,833 of the increase and additional increases in
general and administrative expenses particularly ASC depreciation and costs
associated with being publicly held accounted for the remaining increase. For
the six month period ended December 31, 1996, general and administrative
expenses increased $289,087 or 72% to $688,388, from $399,301 for the same
period in 1995. Personnel expenses accounted for $118,003 of the increase and
additional increases in ASC depreciation and expenses associated with being a
publicly held company accounted for the remaining increase.
Marketing and sales expenses for the three months ended December 31,
1996 increased $59,720 or 117% to $110,628 from $50,908. Personnel expenses
represented $49,029 of the increase reflecting the increased marketing and sales
activity being undertaken by the Company to increase the placement of the ASC
units. Marketing and sales expenses for the six months ended December 31, 1996
increased $144,685 or 122% to $263,098 from $118,413 for the same period in the
prior year. Personnel expenses represented $111,160 of the increase between the
two periods.
Research and development expenses for the three months ended December
31, 1996, increased $30,386 or 70% to $73,589 from $43,203 for the corresponding
period in the prior fiscal period. For the six month period ended December 31,
1996, research and development expenses increased by $45,895 or 50% to $137,999
compared to $92,104 for the corresponding period in the prior fiscal period.
Research and development expenses relate primarily to the development of new
software tools for ASCs and costs associated with the development of new
experimental models of the ASC. The Company expects these costs to stay
relatively stable for the balance of the fiscal year.
Interest income increased to $21,219 for the three months ended
December 31,1996, as a result of the investment of cash surpluses generated from
the Company's public offering in May 1996. Interest expense decreased from
$46,949 for the three month period ended December 31, 1995 to $3,097 for the
same period in 1996. The decrease is the result of a reduction in debt of
$1,178,400 between the two periods. For the six month period ended December 31,
1996, interest income increased by $65,626 to $66,669 for the six month ended
December 31, 1996 and interest expense decreased by $81,586 to $5,836 as a
result of the cash generated from the Company public offering in May 1996 which
allowed the Company to pay down its outstanding debt and invest the surplus.
Net loss for the three months ended December 31, 1996, increased
$185,838 to $539,043 from $353,205 for the same period in the prior fiscal year.
Net loss for the six months ended December 31, 1996 increased $319,148 to
$951,125 from $631,977 for the comparable period in the prior year. The Company
expects to have increases in its revenues as it invests in expanding its network
of ASCs. However, the Company expects to incur additional losses as it continues
to invest in expanding its network of ASCs and until newly placed ASCs begin to
generate package shipping revenue sufficient to offset the Company's investment
in such machines and related operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed a public offering in May 1996 which raised
approximately $5.1 million. During the first quarter of the current fiscal year,
the Company received an additional $0.3 million as a result of the exercise by
the underwriter of the public offering of its overallotment option. The Company
used approximately $1.9 million of the proceeds to repay bridge notes and bank
debt, leaving net proceeds of approximately $3.5 million to finance growth and
working capital.
The Company's loss for the six month period ended December 31, 1996 was
$951,125. As noted above, the Company expects revenue levels to continue
increasing as additional ASC units are placed at retail locations. However, the
Company expects to incur losses for the foreseeable future due to the ongoing
activities of the Company to expand its ASC network and the costs incurred in
expanding its organization to support the expected increase in this network.
During September 1996, the Company entered into an agreement with
Kinko's to install up to 250 ASCs in Kinko's Copy Centers by December 1997. In
October 1996, the Company entered into a similar agreement to install 73 ASCs in
OfficeMax locations by the end of January 1997. The total cost of installing
these units will be approximately $1.6 million. Through December 31, 1996, the
Company has installed 77 units at an approximate cost of $440,000. To date, the
Company has utilized funds generated from its May 1996 public offering to fund
the contract obligation to install these units and expects to rely on this and
internally generated funds to continue financing the installations in the short
term while the Company seeks alternative financing. The Company is seeking
commercial financing from third parties for all or a portion of the remaining
installations. There can be no assurance that such financing will be available
to the Company on terms satisfactory to it.
Inventory levels increased by approximately $60,000 as of December 31,
1996, compared to June 30,1996, reflecting the overall increase in purchases
made to fulfill the Kinko's and OfficeMax Agreements. Accounts receivables
increased by approximately $76,500 from June 30, 1996 to December 31, 1996 due
to the seasonal increase in shipping volumes in December. Accounts payables
increased by approximately $147,000 over the same period due to increased level
of inventory purchases and shipping activity. Accrued liabilities and deferred
revenue decreased due to reversals of deferred revenues resulting from the
exercise of return rights and recognition of revenue on a monthly basis on
leased units remaining.
Based on current commitments and on-going working capital needs, the
Company believes that it will require additional debt or equity funds within the
next six to eight months to continue to penetrate the market for automated
shipping and to fund its on-going operations. There can be no assurance that
such financing will be available to the Company on terms satisfactory to it.
CAUTIONARY FACTORS
THE COMPANY WISHES TO CAUTION SHAREHOLDERS AND PROSPECTIVE INVESTORS
THAT THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, COULD IN THE FUTURE AFFECT
THE COMPANY'S ACTUAL OPERATING RESULTS, AND THAT SUCH RESULTS COULD DIFFER
MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY THE
COMPANY. THE STATEMENTS UNDER THIS CAPTION ARE INTENDED TO SERVE AS CAUTIONARY
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THE FOLLOWING INFORMATION IS NOT INTENDED TO LIMIT IN ANY WAY THE
CHARACTERIZATION OF OTHER STATEMENTS OR INFORMATION UNDER OTHER CAPTIONS AS
CAUTIONARY STATEMENTS FOR SUCH PURPOSE. THE ORDER IN WHICH SUCH FACTORS APPEAR
BELOW SHOULD NOT BE CONSTRUED TO INDICATE THEIR RELATIVE IMPORTANCE OR PRIORITY.
LIMITED OPERATING HISTORY; LOSSES FROM OPERATIONS; GOING CONCERN UNCERTAINTY
The Company entered its current business in 1992 and has had a limited
operating history. The Company's proposed operations are subject to all the
risks inherent in the establishment of a new business. The Company has never
generated net income, continues to sustain substantial operating losses and
expects to continue to operate at a loss thorough its current fiscal year. For
the fiscal year ended June 30, 1996, the Company incurred net losses of $
2,184,287. For the six month period ended December 31, 1996, the Company has
incurred an additional net loss of $951,125. As of December 31 1996, the Company
had working capital of $1,843,837. As of December 31, 1996, the Company had an
accumulated deficit of $6,294,420. The Company will continue to incur these
losses until there is a wide placement of ASCs which generates sufficient
revenues from package shipments to offset operating costs. The report of the
Company's independent public accountants concerning the Company's financial
statements as of June 30, 1995 and 1996 contain explanatory paragraphs relating
to the Company's ability to continue as a going concern. There can be no
assurance that the Company will achieve profitable operations.
MARKET ACCEPTANCE OF PRODUCTS
A prerequisite to the Company's success will be to create demand for
self-service, automated shipping services and wide placement of the Company's
ASCs at retail and other business locations. The Company believes this is an
undeveloped market and there can be no assurance that such demand will develop.
Furthermore, even if demand does arise, there can be no assurance that the
Company's product will gain broad market acceptance. The commercial (non-U.S.
Postal Service) package shipping market is dominated by a relatively small
number of established carriers, which, together with the U.S. Postal Service,
process the vast majority of consumer and small business package shipping
transactions. There can be no assurance that any of such dominant commercial
package shippers or the public will adopt a self-service shipping center concept
or that they will select the Company's ASC in preference to the shipping
services offered by its competitors or potential competitors.
DEPENDENCE UPON CARRIERS
The Company is dependent upon the United Parcel Service ("UPS") to pick
up and transport packages processed via the Company's ASCs. Any interruption in,
or increase in price of, such service, or the failure of the Company to continue
to maintain arrangements with UPS or to develop relationships with other package
carriers, would cause an interruption of service to the Company's customers and
would have a material adverse effect upon its business. The Company has no
control over the nature, cost or availability of services provided by any
carrier and has no long term contracts with such carriers.
SUBSTANTIAL INVESTMENT IN EQUIPMENT
As a part of its business strategy, the Company seeks to place ASCs, at
its own expense, in locations that have the potential to generate high package
volume and with businesses that have multiple strategic locations, such as
business centers, grocery stores and other service provider chains. Although the
Company was traditionally able to sell ASCs with financing from third party
lessors, no assurance can be given that similar financing will be available in
the future to finance the Company's plan of placing ASCs in service at its own
expense.
Although the Company believes that such a strategy will lead to the
generation of high package shipping volume and that such placements of ASCs is
cost-effective, there can be no assurance that this strategy will be successful
or that the Company will be able to recover its investments in the ASCs placed
in service pursuant to this program either through profit margins or higher
volumes of package shipments.
COMPETITION
The commercial (non-U.S. Postal Service) package shipping market is
dominated by a relatively small number of companies which have more experience
in the industry and have greater financial and technical resources than the
Company. Both FedEx, Inc. and UPS have test marketed automated self-service
shipping terminals, but have, to the best of the Company's knowledge,
discontinued such tests, and neither of them currently operate competing
machines in the market that are comparable to the form and function of the
Company's ASC. In addition, the Company competes with major air express
carriers, all of which deploy large numbers of "drop boxes" which may compete
with the Company's ASCs. According to industry sources, these carriers are
deploying additional drop boxes on an ongoing basis. Many of such boxes have or
will be installed in business centers, office parks and shopping malls, which
could be potential sites for the Company's ASCs. The Company also faces intense
competition from the related service industry providing package collection
services, such as mail and packaging stores. In addition, the Company's
competitors and the dominant package shippers, all of which have greater
resources than the Company, could develop products competitive with the
Company's ASCs.
ABILITY TO FORM STRATEGIC RELATIONSHIPS
The Company's strategy includes the formation of strategic
relationships with major carriers and retailers. The Company believes that
relationships with carriers will enable it to deploy its proprietary technology
in the market by leveraging a carrier's established service and distribution
channels. The Company has had limited success to date in forming a strategic
relationship with a carrier. The Company has also sought to establish
relationships with multi-site retailers. To date, the Company has entered into
contracts with Kinko's and OfficeMax and some other smaller multi- site
retailers. However, there can be no assurance that the Company will be
successful in creating additional multi-site retailer relationships and/or
successfully retain and grow the existing multi-site retailer relationships.
DEPENDENCE ON PROPRIETARY RIGHTS
The Company's success will depend, in part, upon its ability to protect
its proprietary technology, for which it relies on a combination of patent,
copyright, trademark and trade secret laws. Although the Company has received
patents for its ASC, there can be no assurance that current intellectual
property laws will afford the Company significant protection against competitors
or that other technology will not be developed to functionally compete with the
product. The Company believes that one or more major carriers, all of which have
greater financial, technical and marketing resources than the Company, have
attempted to develop or purchase products or technologies competitive with the
Company's ASCs. There can be no assurance that the Company will be able to
maintain a competitive advantage in the ASC market based upon its proprietary
technology.
TECHNOLOGICAL RISKS
The Company anticipates that any market which develops for automated
shipping services will be characterized by rapidly changing technology and user
preferences. Such market will likely be heavily influenced by the preferences
and acceptance of such technology by major package and parcel carriers. There
can be no assurance that future products or technology developed by others will
not render obsolete the Company's technology. Failure on the part of the Company
to develop new technology to meet competitive challenges may adversely affect
the Company's prospects.
UNINSURED OBLIGATIONS TO SHIPPING CUSTOMERS
The Company or a retailer with whom a package is deposited may have
exposure to a customer to the maximum extent of the declared value of the
package in the event of its damage or destruction while in the possession of the
Company or a retailer. The Company limits its liability to the customer to the
amount of the declared value pursuant to the shipping transaction documentation,
and relies upon the carrier to reimburse it or the customer for damage occurring
during shipment. The Company, however, has no insurance which would protect it
against such losses.
QUARTERLY REVENUE FLUCTUATION; SEASONALITY
The Company expects to experience continued and substantial
fluctuations in revenue due to seasonal changes which affect the volume of
package shipping transactions. Such fluctuations create significant imbalances
in the Company's cash flow. Potential investors and shareholders should not,
therefore, rely on individual quarterly results as being indicative of the
Company's overall performance.
FRANCHISE REGULATION
The Federal Trade Commission regulates the offer and sale of franchises
under its "Franchise Rule," a regulation which sets forth standards mandating
disclosure of information before the sale of a franchise or business
opportunity. Additionally, several states, including Minnesota, have laws and
rules which regulate various aspects of franchising and the sale of business
opportunities. The Company believes that its programs for the sale, lease or
placement of ASCs do not constitute franchises or business opportunities within
the meaning of the Franchise Rule or such state laws. If the Company should be
required to comply with such laws or rules it would incur substantial costs,
delays and other burdens associated with various franchise registration and
disclosure compliance obligations. In addition, there can be no assurance that
other governmental regulations will not hinder the Company's plans. A finding
that the Company has violated state franchise laws or regulations of the
Franchise Rule could result in administrative, civil or criminal actions against
the Company and could materially and adversely affect its business. In addition,
if the Company is found to have violated franchise laws, certain persons
entitled to the benefit of such laws may have the right to rescind their
purchases or leases of the Company's ASCs, in addition to recovering damages,
interest and attorneys' fees.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
On December 12, 1996, the Company held its annual shareholders'
meeting. There were 4,012,189 shares of common stock outstanding and entitled to
vote, and a total of 2,569,018 shares (64.03%) were represented at the meeting
in person or by proxy. The following summarizes vote results of proposals
submitted to the Company's shareholders.
1. Proposal to elect seven directors, each for a one-year term.
For Withhold Authority
Bruce H. Senske 2,556,192 12,826
Willis K. Drake 2,558,692 10,326
Ronald L. Kotula 2,558,692 10,326
Michael Fox 2,494,005 75,013
Gary W. Ramsden 2,558,442 10,576
Ronald D. Schmidt 2,558,692 10,326
A. Richard Vogen 2,558,692 10,326
2. Proposal to ratify the appointment of Arthur Anderson LLP as the
Company's independent public accounts for the fiscal year ending
June 30, 1997.
For: 2,556,478 Against: 11,500 Abstain: 1,040
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
For: 2,525,328 Against: 13,328 Abstain: 30,362
ITEM 5. Installation and Marketing Agreement, dated October 16, 1996,
between the Company and OfficeMax, Inc.
On October 16, 1996, the Company entered into a 36 month Installation
and Marketing Agreement with OfficeMax, Inc. The terms of the OfficeMax
Agreement require the Company to install 73 ASCs into various CopyMax locations
by the end of January 1997. Under the terms of the OfficeMax Agreement each ASC
shall remain in service for 36 months following the date of its installation.
The Company has completed installation at 70 locations by January 23, 1997.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 10.1 Installation and Marketing Agreement,
dated October 16, 1996, between the Company
and OfficeMax, Inc.*
Exhibit 27 Financial Data Schedule
a. Reports on From 8-K
None
- -----------
* Certain portions deleted and filed separately with the Commission pursuant to
a request for confidential treatment.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in they City of Minneapolis, State of Minnesota on February 13,
1997.
U-SHIP, INC.
By: /s/ Anwar H. Bhimani
Anwar H. Bhimani
Vice President and Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
U-SHIP, INC.
EXHIBIT TO FORM 10-QSB
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- ----
Exhibit 10.1 Installation and Marketing Agreement, dated
October 16, 1996, between the Company's
and OfficeMax, Inc.*
Exhibit 27 Financial Data Schedule
- --------
* Certain portions deleted and filed separately with the Commission pursuant to
a request for confidential treatment.
INSTALLATION AND MARKETING AGREEMENT
THIS INSTALLATION AND MARKETING AGREEMENT is made and entered into in
the State of Ohio this day of 16, October 1996, by and between OFFICEMAX INC., a
corporation organized and existing under the laws of Ohio ("OFFICEMAX INC.") and
U-SHIP, Inc., a corporation organized and existing under the laws of the State
of Utah ("U-SHIP"), and is based on the following premises:
WHEREAS, OFFICEMAX INC. PROVIDES ADMINISTRATIVE, DISTRIBUTION AND OTHER
BUSINESS SUPPORT TO APPROXIMATELY 450 RETAIL SERVICE LOCATIONS AROUND THE WORLD
WHO ARE LICENSED TO PROVIDE COPYING, PRINTING, SHIPPING, MAILING,
PHOTO-FINISHING AND TELECONFERENCING SERVICES UNDER THE TRADEMARK, OFFICEMAX
INC.; AND
WHEREAS, U-SHIP engages in the manufacture and sale of self-service,
consumer oriented, automated shipping center products (ASCs), complete with
equipment and controlling software, and provides processing services and
technical support with respect to such ASC's; and
WHEREAS, OFFICEMAX INC. wishes to provide package shipping services,
using the automation provided by U-SHIPS ASC's;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, OFFICEMAX INC. and U-SHIP agree as follows:
1. The Work. U-SHIP, at its sole expense, hereby agrees to deliver and install
an automated shipping center (ASC) at its OFFICEMAX INC. retail service
locations listed on Exhibit A (ASC Site). U-SHIP further agrees to provide the
processing services and technical support with respect to such ASC's. The
delivery and installation of the automated shipping center and the processing
services, technical support and maintenance with respect to such ASC's required
of U-SHIP pursuant to this Agreement (collectively, the "Work") is more
particularly described on Exhibit B, attached hereto and incorporated herein.
This Installation And Marketing Agreement shall constitute the "Agreement"
between the parties and shall set forth the rights and liabilities of the
parties to this Agreement. To place an order for the delivery and installation
of an ASC not included on Exhibit A, OFFICEMAX INC. will complete an
installation request form ("Request") attached hereto and incorporated herein as
Exhibit C. Said Request(s) shall not become part of the Agreement until such
Request(s) are signed by both parties. U-SHIP reserves the right to decline to
accept any Request for any reason, including but not limited to election not to
be subjected to any state's franchise, business opportunity, or other commercial
law, or for no reason. U-SHIP hereby agrees to perform the Work in accordance
with the terms and conditions of this Agreement. To the extent that a conflict
exists between the terms and conditions of Exhibit B and the terms and
conditions of the Agreement, the Agreement shall control.
2. Term of Agreement and Installation Term; Effect of Expiration of Term. The
term of this Agreement shall commence on the date that this Agreement is fully
executed by both parties hereto ("the Effective Date") and shall expire at the
end of December 31, 1997 ("Expiration Date"), Any ASC's installed in accordance
with the terms and conditions of this Agreement shall remain in operation at the
site of installation for Thirty-six (36) months from the date of installation
("Installation Term"), notwithstanding the earlier expiration of this Agreement.
The obligations of the parties pursuant to this Agreement shall survive the
expiration of this Agreement throughout the Installation Term for each ASC
remaining in operation as of the Expiration Date. Upon expiration of this
Agreement (except as to those ASC's remaining in operation as of the expiration
date) the following shall apply upon the expiration of the Installation Term,
(i) the software license, maintenance agreements, and services agreements
related to each affected ASC shall automatically and simultaneously terminate
and (ii) U-SHIP shall promptly disassemble and remove each affected ASC, unless
this Agreement is renewed by mutual written agreement of the parties before such
date. All ASC installations will be evaluated by both U-Ship and
- -----------
* Indicates marked portions deleted and filed separately with the Commission
pursuant to a request for confidential treatment.
OfficeMax representatives on a revolving 12 month cycle to review the usage,
customer acceptance, marketing programs and other variables affecting
transaction volume. Through mutual agreement of both parties (U-Ship and
OfficeMax) the ASC may be relocated to a site where shipping is a viable market
opportunity.
3. Installation of ASC's. Prior to the installation of an ASC in an ASC Site,
OFFICEMAX INC., at its sole cost, shall prepare the ASC Site according to the
specifications set forth in Exhibit D. OFFICEMAX INC. shall pay the basic
charges for telephone lines, directly to the appropriate phone company, but
OFFICEMAX INC. shall not be responsible for per-call charges for data transfer
from each ASC. OFFICEMAX INC. shall allow U-SHIP to install ASC's at
approximately 73 OFFICEMAX INC. retail locations to be installed by
approximately January 31, 1997. All ASC's installed pursuant to this Agreement
shall remain in operation at each location for at least Thirty Six (36) months
from date of installation and OFFICEMAX INC. shall not relocate ASC's without
the prior written consent of U-SHIP, which consent will not unreasonably be
withheld. U-SHIP will consider requests to install ASC's at locations outside
the United States. U-SHIP's consent to such requests may involve terms and
conditions different from and additional to those provided herein.
4. Cleaning and Monitoring of ASC's. OFFICEMAX INC., at its sole cost, shall
provide for each ASC regular site services such as cleaning of the ASC and
surrounding area and restocking of label and printer paper and daily examination
of the ASC for damage. OFFICEMAX INC. shall report promptly to U-SHIP by
telephone any visible ASC damage and any reported service problems or
nonfunctioning of the ASC. In addition, OFFICEMAX INC. shall collect cash
payments on behalf of U-Ship made by ASC users.
5. Software Development. The parties have discussed possible development of
software products by U-SHIP specifically for OFFICEMAX INC., but any such
development shall be the subject of a separate agreement.
6. Software License And Maintenance. In the event that such software is licensed
by a third party as an operating system of the computer, U-SHIP shall notify
OFFICEMAX INC. of the existence of restrictions under such license and a copy of
the relevant license(s) shall be attached as Exhibit E. With respect to the
software licensed and provided by U-SHIP for use by OFFICEMAX INC. (the "U-SHIP
Software"), the following terms and conditions apply to OFFICEMAX INC.' use of
such U-SHIP Software. All U-SHIP Software supplied to OFFICEMAX INC. or
installed in the ASC's is covered by this license, regardless of whether
separately listed on any listing or presentation of software products of U-SHIP
supplied to OFFICEMAX INC..
7. Grant of License: Limitations. U-SHIP hereby grants to OFFICEMAX INC., for
the U-SHIP Software provided to or with each ASC, a single, non-transferable,
and nonexclusive license to use the U-SHIP Software in the normal operation of
the ASC. No right, title, or interest in the U-SHIP Software or any part of it
or in the ASC hardware is transferred hereby; OFFICEMAX INC. does not hereby
acquire any right, title, or interest in the screens, appearance, "look and
feel," designs, icons, or other characteristics or parts of the U-SHIP Software
and/or ASC hardware. OFFICEMAX INC. shall have no right to alter, sublicense,
copy, or distribute the U-SHIP Software or any part of it, and OFFICEMAX INC.
shall not examine, reverse compile, or reverse engineer the U-SHIP Software or
clone it (or any part of it) or adopt it or any part of it as OFFICEMAX INC.'
own, or translate the U-SHIP Software into any computer language (e.g., COBOL,
C, etc.) or human language (e.g., French) other than the language in which it is
supplied.
8. Proprietary Notices. All or a part of the U-SHIP Software may have been
patented. Patent or copyright notices may have-been included in the U-SHIP
Software for protective purposes, but such notices shall not be construed as
evidencing publication of the U-SHIP Software.
9. Confidentiality of Software. The U-SHIP Software and information pertaining
to it, to the extent not published by U-SHIP, is confidential. Title to the
U-SHIP Software remains at all times in U-SHIP. OFFICEMAX INC. shall notify its
employees of the confidential nature of the software and related information of
U-SHIP and shall be responsible for ensuring that such employees do not disclose
such information in violation of the terms of this Agreement.
10. Updates and Enhancements. From time to time, U-SHIP may offer updates and/or
enhancements to the U-SHIP Software. Updates are features, minor enhancements,
or problem corrections that are added to the U-SHIP Software and which shall be
issued periodically to OFFICEMAX INC. for no additional cost. U-SHIP may also
develop additional features that add significant functionality to the U-SHIP
Software which may be licensed separately as enhancements. If OFFICEMAX INC.
elects to purchase a license for an enhancement, OFFICEMAX INC. shall be charged
the then current price therefor, and such enhancements shall be covered by the
terms of this Agreement.
11. Commissions For Services.
A. *
B. Within thirty (30) days following the end of each calendar month
during the term beginning with the Effective Date, U-SHIP shall furnish to
OFFICEMAX INC. complete and accurate statements of shipments made during the
calendar month certified to be accurate by a designated representative of
U-SHIP. Such statements shall reflect cash payments made by ASC users collected
by OFFICEMAX INC. as a credit to U-SHIP. It is a material term and condition of
this Agreement that shipments be reported on a store by store basis. Receipt or
acceptance by OFFICEMAX INC. of any of the statements furnished pursuant to this
Agreement or of any sums paid hereunder shall not preclude OFFICEMAX INC. from
questioning the correctness thereof at any time and in the event that any
inconsistencies or mistakes are discovered in such statements or payment, they
shall immediately be rectified and the appropriate payments made by U-SHIP or
OFFICEMAX INC. as the case may be. Any payments which are made hereinunder by
U-SHIP or OFFICEMAX INC., as the case may be, after due date required therefore,
shall bear interest at the then current prime rate as quoted in the Wall Street
Journal (or the maximum rate permissible by law, if less than the current prime
rate) from the date such payments are due to the date of payment.
C. The parties shall maintain complete and accurate records in accordance with
generally accepted accounting principles to substantiate all of U-SHIP's Cash
collections and Commission payments hereunder including without limitation,
invoices, correspondence, banking and financial records. The parties shall
retain such records for three (3) years from the expiration or earlier
termination of this Agreement or any renewals hereof. At any time during the
term of this Agreement and for one (1) year following the expiration or earlier
termination of this Agreement, upon fifteen (15) days written notice to U-SHIP,
OFFICEMAX INC. or its nominees shall have the right to inspect and audit
U-SHIP's books and
- -----------
* Indicates marked portions deleted and filed separately with the Commission
pursuant to a request for confidential treatment.
records as they relate in any manner to this Agreement and the relationship of
the parties. U-SHIP agrees not to cause or permit any interference with
OFFICEMAX INC. or OFFICEMAX INC. nominees in the performance of their duties of
inspection and audit. The exercise by OFFICEMAX INC. in whole or in part, or at
any time or times of the right to audit records, the acceptance by OFFICEMAX
INC. of any statement or statements or the receipt and deposit by OFFICEMAX INC.
of any payment tendered by or on behalf of U-SHIP shall be without prejudice to
any rights or remedies of OFFICEMAX INC. and shall not stop or prevent OFFICEMAX
INC. from thereafter disputing the accuracy of any such statement or payment.
Should an inspection or audit conducted pursuant hereto reveal any shortfall,
U-SHIP shall pay to OFFICEMAX INC. an amount equal to such shortfall together
with the interest thereon at the then current prime rate from the date such
amount became due until the date of payment. Nothing herein shall be construed
to prevent OFFICEMAX INC. and/or its duly authorized representatives from
testifying in any court of competent jurisdiction with respect to the
information obtained as a result of such inspection or audit in any action
instituted to enforce the rights of OFFICEMAX INC. under the terms of this
Agreement.
12. *
13. Force Majeure. Notwithstanding anything herein to the contrary, neither
party shall be responsible for failure to fulfill its non-monetary obligations
under this Agreement due to fire, flood, war, labor disputes, shortages, riots,
insurrections, explosions, earthquakes, acts of god or any other cause beyond
its control and without its fault or negligence provided it promptly notifies
the other party of its inability to fulfill its non-monetary obligations, the
cause of its inability to fulfill its non-monetary obligations, and the
non-performing parties' reasonable estimation of the duration of its inability
to fulfill its non-monetary obligations provided the non-performing party
exercises reasonable efforts to commence fulfillment of its obligations
hereunder as soon as possible and proceeds to perform with dispatch once the
cause(s) are removed or cease.
14. Title and Risk of Loss. Title to the ASC's shall remain in U-SHIP and risk
of loss pertaining to the ASC(s) shall be borne by U-SHIP at all times during
this Agreement, except that U-SHIP shall not bear the risk of loss to the ASC(s)
occurring after installation of the ASC at the installation site in the event
such loss arises pursuant to accident, disruption or surge of electrical power,
fire, flood or any other casualty, repair or attempted repair by anyone not
authorized by U-SHIP, or neglect, misuse or abuse by OFFICEMAX INC. or others at
the installation site, other than representatives of U-SHIP.
15. Mutual Indemnification. Each party shall indemnify, defend and hold the
other harmless from and against all liability, claims, actions, suits and other
proceedings of any nature whatsoever, and any and all losses, judgments,
damages, expenses or other costs (including reasonable counsel fees and
disbursements and court costs), which the other party may incur, suffer, become
liable for, or which may be asserted against the other party as a result of (i)
the acts, errors or omission of such party or its directors, officers,
employees, contractors, agents or assigns, as a result of or while performing
its or their obligations hereunder and/or (ii) any breach or violation by such
party of any of the terms and provisions of this Agreement. The indemnification
provided by, or granted pursuant to, the provisions of this Paragraph, shall not
be deemed exclusive of any other rights to which a party may be entitled. All
rights to indemnification under this provision shall be deemed to be provided by
a contract between the parties
- -----------
* Indicates marked portions deleted and filed separately with the Commission
pursuant to a request for confidential treatment.
while this Agreement and relevant provisions of applicable law, if any, are in
effect. Any repeal or modification hereof or thereof shall not affect any such
rights then existing. The indemnification provided by, or granted pursuant to
this provision shall, unless otherwise provided, inure to the benefit of each
party and its successors and assigns. Any indemnification due pursuant to the
terms herein shall be made promptly, and in no event later than thirty (30)
days, after such party's receipt of written request therefor. A party's right to
indemnification as provided in this provision shall be enforceable in any court
of competent jurisdiction subject to the limitations of liability stated in
Sections 26, 28, 29 and 30 hereto.
16. Mutual Obligation to Purchase Insurance. Without limiting the foregoing
indemnification obligations, each party agrees to maintain at its own expense,
during the term of this Agreement and for one (1) year hereafter, with an
insurer or insurers reasonably acceptable to the other party, the following
insurance coverage: (a) commercial general liability insurance including
products/completed operations, blanket contractual liability, and personal
injury and advertising injury liability coverage in amounts no less than Two
Million Dollars ($2,000,000.00) combined single limit for each single occurrence
for bodily injury and property damage and Two Million Dollars ($2,000,000.00) in
the general aggregate, and (b) product liability insurance providing adequate
protection for both parties against any such claims or suits in amounts no less
than Two Million Dollars ($2,000,000.00). Within thirty (30) days from the
Effective Date hereof each party shall submit to the other party a certificate
evidencing such insurance, that such party has been named as an additional
insured party on said insurance and, with respect to any claim for which the
insuring party is obligated to indemnify the other party, that said insurance
shall be primary coverage before any other similar insurance available to the
other party. The certificate shall provide for at least thirty (30) days advance
written notice to the other party of any cancellation or reduction in such
coverage.
17. Termination For Default. Upon the occurrence of a material default by the
other party in the performance of the terms and conditions of this Agreement,
either party may, by written notice to the other party, terminate this Agreement
in whole or in part including the termination of any installation of an ASC
pursuant to this Agreement. The following events shall constitute a material
default:
(1) The failure of the other party to pay any monies upon the terms
contained herein;
(2) The failure of the other party to perform any of its obligations
under this Agreement; or
(3) The other party shall become bankrupt, have an order of
receivership issued against it, file a petition in bankruptcy, make an
arrangement with or assignment in favor of the creditors or go into liquidation
(other than voluntary liquidation for purposes of merger or reorganization,
where it does not result in any material diminution of the other party's ability
to perform its obligation hereunder); or
(4) The sale or transfer of control of the other party or substantially
all of the assets thereof to an unrelated entity. In the event that a party
hereto (a) merges with one or more other entities licensed to use the such
party's trademark, or (b) assigns all its right, title and interest in this
Agreement to the owner/licensor of said trademark, such a transfer shall be
specifically excluded as an event of default for purposes of this Agreement.
Either party's right to terminate this Agreement for any of the reasons listed
hereinabove may be exercised if the defaulting party does not promptly implement
the necessary measures to correct such failure within thirty (30) days (or more
if authorized in writing by the non-defaulting party) after receipt of notice
from the non-defaulting party specifying in reasonable detail the failure and if
the defaulting party does not continue to diligently prosecute the cure to
completion.
18. Non-Disclosure/Confidentiality. OFFICEMAX INC. and U-SHIP may exchange
business information or technical information during the term of this
Agreement that is proprietary to the disclosing party and considered by it
to be a trade secret ("Confidential Information"). If at the time of
disclosure such information is identified in writing as proprietary, or
identified as proprietary with follow-up written notification thereof
within ten (10) days, then the receiving party will guard its
confidentiality with the same degree of care that such party replies to its
own proprietary information, but at least using reasonable care. This
obligation shall survive any termination of this Agreement but shall not
apply to information which:
(i) Was in the receiving party's possession, without
restriction, prior to its receipt from the disclosing
party;
(ii) is independently developed by the receiving party
without using Confidential Information of the
disclosing party;
(iii) is or becomes public knowledge without fault of the
receiving party;
(iv) is or becomes available to the receiving party,
validly without restriction, from a source other than
the disclosing party;
(v) becomes available to a third party from the
disclosing party, without restriction;
(vi) is publicly disclosed (not under adequate protective
order) by the receiving party under an order of a
court or government agency, provided that the
receiving party provides prior written notification
to the disclosing party of such obligation and of any
opportunity to oppose such order.
19. Protection of the Mark. During the term of this Agreement, U-SHIP agrees to
refrain from any unauthorized use of the trademark, OFFICEMAX INC. (the "Mark")
and agrees to assure usage of the Mark solely as approved hereunder and as
otherwise approved in writing by OFFICEMAX INC.. U-SHIP shall not use, or permit
the use of, the Mark in written and/or oral communication(s) or in any other
manner or form without prior written consent for each and every such use. This
Agreement does not constitute a grant of a license to OFFICEMAX INC. for use any
of U-SHIP's trademarks, logos or trade names; to the extent trademarks, logos or
trade names appear on an ASC, on screen or on line, the same are for
identification purposes and no proprietary right or license is hereby given to
OFFICEMAX INC.
20. Representations and Warranties. Each party represents and warrants the
following:
a. That the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby are within its corporate
powers, have been duly authorized by all necessary action, and do not
contravene, violate, or conflict with, or constitute a default under, any
provision or applicable law, regulation, any governing documents, charter or
bylaw, or any agreement, license, judgment, injunction, order, decree or other
instrument binding on it;
b. That it has the legal right, power and authority to grant the rights
to the other party as set forth herein and to execute and deliver this Agreement
and to perform and/or permit all the transactions contemplated hereby;
c. That it will not harm, misuse or bring into disrepute the
trademark(s), commercial symbol(s), trade secret(s), servicemark(s), and
logotype(s) of the other party;
d. That it will not create any expenses chargeable to the other party
without such party's prior written approval of said cost;
e. That it will comply with the terms of this Agreement and all laws
and regulations relating or pertaining to the subject matter of this Agreement
and shall comply with any regulatory agencies which shall have jurisdiction over
the subject matter of this Agreement.
21. Non-Exclusive. The parties hereto agree that nothing contained in this
Agreement shall be construed as creating an exclusive relationship between the
parties, except that during the period when an ASC is installed at a ASC Site,
OFFICEMAX INC. shall not install or use any competing automatic shipping system
in the ASC Site. Subject to the foregoing, this Agreement is non-exclusive and
nothing in this Agreement shall prevent the other party from entering into the
same or similar relationship with others; or from developing similar or
competing relationships with others.
22. Relationship of Parties. This Agreement does not make either party the
employee, agent, franchisee, fiduciary or legal representative of the other
party for any purpose whatsoever. Neither party shall have any authority to bind
the other party in agreements with third parties. In fulfilling their
obligations hereunder, each party shall act as an independent contractor.
23. Amendments. No change, alteration or amendment to this Agreement shall be
valid unless made in writing and signed by the duly authorized representative of
each party.
24. No Assignment. Except as provided herein, neither party shall have any right
to transfer or assign its rights or obligations under this Agreement to any
third party without prior written consent of the other party; except that either
party may assign or transfer its interest under this Agreement to any successor
by merger or consolidation or an entity which acquires substantially all of the
assets of such party and which agrees to assume, and be bound by the terms of
this Agreement. Notwithstanding anything herein to the contrary, either party
shall have the right to assign, transfer, convey, sell, encumber or in any way
alienate all or any part of this Agreement (collectively "transfer") to any of
its partners, related entities, subsidiaries or affiliates, or to a successor
entity in the event of merger, reorganization, consolidation, transfer, sale,
stock purchase, public offering or other change of ownership (collectively
"affiliate") without consent of or recourse by the other party provided that at
the time of such transfer the affiliate (i) is capable of performing and is
legally authorized to perform all of the transferring party's obligations
hereunder, (ii) has a net worth in excess of the transferring party prior to the
transaction and (iii) consents in writing to such transfer.
25. Notices. Any notice required or permitted to be given under this agreement
is effective upon receipt by the party to be charged with notice, shall be given
in writing, and may be delivered by (a) personal service, (b) registered mail,
postage prepaid, addressed to the other party, (c) overnight delivery services
such as United Parcel Service, or (d) facsimile with confirmation of delivery:
Mr. Douglas Scroggins
OFFICEMAX INC.
3605 Warrensville Center Road
Shaker Heights OH 44122-5203
U -SHIP, Inc.
5583 West 78th Street
Edina, Minnesota 55439
Attention: Bruce H. Senske
26. Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Ohio.
Except as hereinafter provided, any disputes between the parties and
based upon or arising out of this Agreement shall be subject to
resolution through consultation of the parties in good faith. If such
consultation should fail to result in a resolution of the disputes,
then each dispute not so resolved may, on demand of either of the
parties hereto, be submitted to binding arbitration in accordance with
the rules of the American Arbitration Association ("AAA"). Such
arbitration shall be governed by the United States Federal Arbitration
Act ("FAA"), 9 U.S.C. sec.1, et A. In the event any rule -- or
procedure of the AAA applicable to such proceeding shall be in conflict
with the FAA or established case law under the FAA, the FAA shall
prevail and preempt any other interpretations, rules, or procedures to
the contrary. Unless the parties mutually agree otherwise, the
proceedings shall not be administered by the AAA; rather, the
proceeding shall be administered by a single arbitrator agreed upon by
the parties.. If the parties cannot agree upon a single arbitrator, a
panel of three arbitrators shall be selected in the following manner:
OFFICEMAX INC. and U-SHIP shall each select one (1) arbitrator who
shall be free from conflict of interest with respect to the subject
matter and the parties to the proceeding. Any arbitrator who is
appointed shall answer any reasonable interrogatories propounded by
another party regarding the qualifications and the existence of any
conflict of interest, and such answers may be used to disqualify or
challenge such arbitrator. The arbitrators so selected shall designate
a third arbitrator who shall, similarly, be free of any conflict of
interest. The arbitrators shall act based upon a decision of the
majority of them. If any arbitrator fails or ceases to act, or is
disqualified, such arbitrator shall be redesignated or appointed in the
manner and by the same person or persons who originally appointed him
or her. The arbitration proceedings shall be held in San Francisco,
Ohio or such other location as the parties may mutually agree. For the
purpose of enforcing the provisions of this Section, OFFICEMAX INC.
consents to the personal jurisdiction of the United States Federal
District Court in the State of Ohio, U.S.A., and U-SHIP consents to the
personal jurisdiction of the United States Federal District Court for
the Southern District of Ohio, for the purpose of compelling
arbitration proceedings or confirming an award rendered therein. After
confirmation, either party may seek whatever assistance is desired of
any additional court otherwise having jurisdiction to enforce such
award. The arbitrator(s) may award a prevailing party in any
arbitration proceeding hereunder any or all of the following relief or
remedies: (a) judgment; (b) injunctive relief; (c) compensatory
damages; or (d) interest, attorney's fees and other reasonable and
necessary costs (including, without limitation, fees of arbitrators,
transcripts, hearing rooms, and expenses of arbitrators). The parties
agree that no award in arising out of or in connection with this
Agreement shall consist of or include punitive damages. The parties
agree that this provision for arbitration shall not be interpreted to
prevent injunctive relief pending resolution of any dispute hereunder
through arbitration.
27. Taxes. U-SHIP shall be solely responsible for and shall pay all assessments,
taxes, including sales taxes and/or other governmental charges pertaining to the
use and ownership of the ASC, however designated, and which are now or hereafter
imposed under or by any governmental agency or authority, except such taxes
which may be applicable to the commission collected by OFFICEMAX INC. pursuant
to Section 11 hereinabove.
28. Limited Warranty. U-SHIP WARRANTS THAT AT THE TIME OF INSTALLATION AND FOR
90 DAYS THEREAFTER EACH UNIT OF THE ASC WILL BE FREE FROM DEFECTS IN MATERIAL
AND WORKMANSHIP AND WILL CONFORM TO THE U-SHIP'S PUBLISHED PRODUCT DESCRIPTIONS.
THIS WARRANTY SHALL NOT APPLY TO ANY ASC WHICH HAS BEEN NEGLECTED, ALTERED,
ABUSED, USED FOR A PURPOSE OTHER THAN THOSE APPROVED BY U-SHIP, OR REPAIRED BY
OFFICEMAX INC. OR ANY OTHER PERSON WITHOUT U-SHIP'S WRITTEN INSTRUCTIONS.
WITHOUT LIMITING THE FOREGOING, U-SHIP WARRANTS THAT AT THE TIME OF INSTALLATION
OF ANY MODULE, UPDATE, OR ADDITION OF THE U-SHIP SOFTWARE, THE U-SHIP SOFTWARE
WILL CONFORM IN ALL MATERIAL RESPECTS TO THE CAPABILITIES STATED IN THE USERS'
MANUAL SUPPLIED WITH THE ASC. IF THE U-SHIP SOFTWARE DOES NOT MEET THIS
REQUIREMENT AND U-SHIP DOES NOT DETECT AND CORRECT A MATERIAL DEFECT THROUGH ITS
OWN MONITORING AND REPAIR SYSTEM, THEN ON NOTICE FROM OFFICEMAX INC., U-SHIP
SHALL REPAIR OR REPLACE THE AFFECTED U-SHIP SOFTWARE. U-SHIP'S WARRANTIES
HEREUNDER SHALL NOT BE ENLARGED, OR IN ANY OTHER WAY AFFECTED BY AND NO
OBLIGATION OR LIABILITY SHALL ARISE OR GROW OUT OF U-SHIP'S RENDERING OF
TECHNICAL ADVICE OR SERVICE HEREUNDER. NO PERSON IS AUTHORIZED TO MODIFY OR
ISSUE ANY OTHER WARRANTY REGARDING THE ASC'S. NO TERMS CONTAINED IN ANY OTHER
DOCUMENTS SHALL BE DEEMED TO ALTER OR AMEND THE TERMS OF U-SHIP'S LIMITED
WARRANTY OR RESPONSIBILITIES HEREUNDER, UNLESS SUCH OTHER DOCUMENT IS AGREED TO
IN WRITING BY THE PARTIES HERETO. OFFICEMAX INC. HAS NOT RELIED ON ANY WARRANTY
OTHER THAN THAT EXPRESSLY PROVIDED IN THIS AGREEMENT.
29. Warranty Disclaimer: Limitation of Remedies. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, U-SHIP DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED,
WITH RESPECT TO THE ASC'S, WHETHER AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR ANY OTHER MATTER. U-SHIP SHALL HAVE NO LIABILITY TO ANY
PERSON FOR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) OF ANY DESCRIPTION,
WHETHER ARISING OUT OF WARRANTY OR CONTRACT, NEGLIGENCE OR TORT, OR OTHERWISE.
THE PARTIES EXPRESSLY AGREE THAT THE LIMITATION OF CONSEQUENTIAL DAMAGES SET
FORTH HEREIN HAVE BEEN SPECIFICALLY BARGAINED FOR AND ARE AGREED ALLOCATIONS OF
RISK AND SHALL SURVIVE THE DETERMINATION OF ANY COURT OF COMPETENT JURISDICTION
THAT ANY REMEDY HEREIN FAILS OF ITS ESSENTIAL PURPOSE. WITH RESPECT TO ANY ASC
AS TO WHICH A DEFECT OR BREACH OF WARRANTY IS DETERMINED TO HAVE EXISTED, U-SHIP
SHALL IN NO EVENT BE LIABLE FOR ANY AMOUNT OR DAMAGES IN EXCESS OF AMOUNTS
RECEIVED BY U-SHIP AS THE TOTAL REVENUES FROM SUCH ASC. THE ALLOCATION OF
REVENUES HAS BEEN NEGOTIATED WITH DUE REGARD TO THIS LIMITATION.
30. Exclusive Remedy for Breach. U-SHIP'S ENTIRE OBLIGATION PURSUANT TO THE
LIMITED WARRANTY SET FORTH IN SECTION 28 SHALL BE LIMITED (AT U-SHIP'S OPTION)
TO REPAIR OR REPLACEMENT OF ANY ASC WHICH PROVES TO BE DEFECTIVE WITHIN THE
WARRANTY PERIOD AND REPAIR OR REPLACEMENT OF SOFTWARE AS STATED IN SUCH
SECTION,. OFFICEMAX INC. SHALL BE ENTITLED TO A REMEDY HEREUNDER ONLY IF IT
NOTIFIES U-SHIP IN WRITING OF THE ALLEGED BREACH OF WARRANTY BEFORE THE
EXPIRATION OF THE WARRANTY.
31. Disclaimer of Earnings. U-SHIP DISCLAIMS ANY WARRANTY, LIKELIHOOD, OR
CERTAINTY OF EARNINGS OR PROFITABILITY OF OFFICEMAX INC. WITH RESPECT TO
OFFICEMAX INC.' PARTICIPATION IN THIS AGREEMENT AND LEASES PURSUANT HERETO.
32. Joint Marketing. On a local and a national basis, OFFICEMAX INC. shall
actively market the package-shipping capability represented by the ASC, within
the restrictions of proper use of U-SHIP's trademarks and trade names as
provided herein. U-SHIP shall provide ongoing support information and advice for
OFFICEMAX INC. advertising and promotion of the ASC. No less than annually,
U-SHIP and OFFICEMAX INC. shall meet and cooperate on an advertising plan and
strategy for the following year.
33. Entire Agreement. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof, and all oral communications,
negotiations and agreements between the parties which took place prior to the
effective date hereof are merged into this Agreement.
34. Exhibits. The following exhibits are attached to this Agreement and are, by
this reference, hereby incorporated and shall be treated as if set forth in full
herein:
Exhibit A: ASC Sites
Exhibit B: Description of Work
Exhibit C: Installation Request Form
Exhibit D: Specifications for ASC Site Preparation
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the date first above written.
U-SHIP, INC.
By:/s/ Bruce H. Senske
Bruce H. Senske,
Chairman and CEO
OFFICEMAX INC.
By: /s/ Douglas L. Scroggins
Title: DVP, Business Services
EXHIBIT A
OFFICE MAX/COPY MAX RETAIL SERVICE LOCATIONS
1. Copy Max #625 3665 Pacific Coast Highway, Torrance CA 90505
2. Copy Max #646 26940 Crown Valley Park, Mission Viejo CA 92691
3. Copy Max #674 17502 Hawthorne Blvd, Torrance CA 90504
4. Copy Max #1 1545 Golden Gate Plaza, Mayfield Heights OH 44124
5. Copy Max #407 3844 S. Noland Road, Independence, MO 64055
6. Copy Max #411 9901 Watson Road, Crestwood MO 63126
7. Copy Max #406 9631 San Pedro Avenue, San Antonio TX 78216
8. Copy Max #423 1515 Town East Blvd, Mesquite TX 75150
9. Copy Max #609 4949 Lakewood Blvd., Lakewood CA 90712
10. Copy Max #611 1431 W. Imperial Hwy., LaHabra CA 90631
11. Copy Max #508 7969 East Arapahoe Road, Englewood CO 80112
12. Copy Max #455 4440 Florin Road, Sacramento CA 95823
13. Copy Max #475 87 Huber Village Blvd., Westerville OH 43081
14. Copy Max #614 11070 Foothill Blvd., Rancho Cucamonga CA 91730
15. Copy Max #613 Riverside CA
EXHIBIT B
THE WORK
U-Ship, at its sole expense, hereby agrees to deliver and install
automated shipping centers ("ASC's") and perform processing services, technical
support and maintenance with respect to such ASC's pursuant to the following
terms and conditions:
1. INSTALLATION.
A. Exerting its best reasonable efforts to meet any agreed installation
dates, U-SHIP shall ship each ASC and install it at the designated site.
Shipment of all ASC's shall be from Minneapolis, Minnesota, and, notwithstanding
any other provisions of this Agreement, all expenses related to transportation
and transportation insurance shall be paid by U-SHIP. Installation shall include
delivery, placement, electrical attachment and telephone hook-up. U-SHIP
personnel or other trained personnel shall run U-SHIP's diagnostic software and
demonstrate the proper functioning of the ASC upon installation. If the ASC is
not operating in accordance with specifications immediately after installation,
OFFICEMAX INC. may reject it, in which case U-SHIP may replace, repair or
re-install the ASC until proper functioning is demonstrated.
B. As soon as reasonably possible following installation of each ASC,
but only once per site, U-SHIP personnel, either on site or by video-conference,
shall render individual or small-group training for the OFFICEMAX INC. personnel
associated with the site. Such training shall be of approximately three hours'
duration and shall include delivery of a training video and a users' manual.
2. TRANSACTION-BASED SERVICES.
A. U-SHIP shall provide data processing services including data
transfers, data handling, and credit card processing. U-SHIP's state of the art
data network provide class five military security to ensure data integrity and
security. Each Model 4100 ASC contacts the U-SHIP Automated Clearing House
system daily. The U-SHIP Clearing House function reads in all package
transactions, reformats encrypted credit card charge data for forwarding to the
credit card processing service, logs activity levels against key maintenance
parameters, and creates a back-up activity file for future reference, should it
be required, for machine performance analysis and development of marketing
statistics.
B. Credit cards accepted by the ASC's shall be those of the VISA,
MasterCard, and American Express systems. U-SHIP shall process such credit card
transactions on its own behalf and for its own account and thereby collect all
revenues from credit card transactions directly from the card issuers. U-SHIP
shall also arrange for the possibility of use of the OFFICEMAX INC. corporate
credit cards in the ASC's and shall provide OFFICEMAX INC. daily with the
billing file for such card. Transactions involving the OFFICEMAX INC. credit
cards shall be deemed to be cash transactions and the associated revenues dealt
with as cash according to Section 11 of this Agreement.
C. No less often than once per month and no more often than once per
week, U-SHIP shall provide data on processed transactions to OFFICEMAX INC. in a
form reasonably requested by OFFICEMAX INC., for further analytical processing
by OFFICEMAX INC.. At an additional setup charge and periodic reporting fee, as
agreed upon in advance by the parties, OFFICEMAX INC. may request and U-SHIP
shall provide analytical reports as reasonably specified by OFFICEMAX INC..
D. Assuming collection of shipping customers' payments according to the
Agreement, U-SHIP shall be responsible for all payments to UPS or other shippers
for shipment of the packages processed by ASC's.
E. Shipping services of U-SHIP under this Agreement shall include the
following, with respect to mailing transactions conducted through use of the
ASC's: (i) handling all interactions and processing all financial transactions
with the package carrier; (ii) package tracking; (iii) loss recovery; and (iv)
provisions of signage and promotional materials and assistance of OFFICEMAX
INC., including press releases and advertising materials for use by OFFICEMAX
INC..
3. ASC GENERAL SUPPORT.
U-SHIP shall provide telephone support for employees of OFFICEMAX INC.
concerning operation or failure of ASC's, at U-SHIP's 1-800 number, provided
that such employees call promptly after a problem occurs, but between the hours
of 9:00 a.m. and 7:00 p.m. Eastern Standard Time, and have the following
information ready: (i) ASC number, from the top of the receipts issued by the
ASC, and on the Managers Screen; (ii) the product function that the ASC was
performing when the problem occurred; (iii) the process that was taking place
when the problem occurred; (iv) a statement of when the problem occurred; and
(v) a description of the steps that OFFICEMAX INC. representatives have taken
since the problem occurred and the information currently being displayed on the
monitor.
4. SOFTWARE TECHNICAL SUPPORT.
Support for the U-SHIP Software generally consists of telephone
technical assistance provided by U-SHIP relating to U-SHIP Software licensed to
OFFICEMAX INC. hereunder and offered during the hours specified in Section 3
above in this Exhibit B. From time to time U-SHIP or OFFICEMAX INC. may notice
and report material deviations between the U-SHIP Software and the U-SHIP manual
for the relevant model ASC ("Software Problems"). In such cases, U-SHIP will
employ reasonable efforts to correct Software Problems within 24 hours of a
report thereof by OFFICEMAX INC. to U-SHIP, or if U-SHIP is unable to provide
such correction by telephone-to OFFICEMAX INC. or to the ASC directly within 24
hours despite the use of all reasonable best efforts, then U-SHIP will supply
the corrections as soon as is reasonably possible. Correction of Software
Problems shall consist of supplying or transmitting to the ASC or OFFICEMAX
INC., or may consist of publishing, corrections which will bring the U-SHIP
Software into compliance with the relevant U-SHIP manual. Any changes in manuals
in connection with this provision shall be for the purpose of removing errors in
documentation, providing consistency of interpretation, or describing an update
or enhancement to the U-SHIP Software.
<TABLE>
<CAPTION>
EXHIBIT C
[GRAPHIC OMITTED]
REQUEST FOR ASC PLACEMENT
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
LOCATION
- ------------------------------------------------------------------------------------------------------------------------------
Store Name:
- ------------------------------------------------------------------------------------------------------------------------------
Contacts - Store Manager:
- ------------------------------------------------------------------------------------------------------------------------------
Customer Service Manager:
- ------------------------------------------------------------------------------------------------------------------------------
Bookkeeper:
- ------------------------------------------------------------------------------------------------------------------------------
Address: Do you go on daylight savings? YES / NO
Time Zone: EASTERN CENTRAL MOUNTAIN PACIFIC ALASKA HAWAII
- ------------------------------------------------------------------------------------------------------------------------------
Phone #: ( ) Fax #: ( )
- ------------------------------------- --------------------------------------------------------- ------------------------------
Current UPS: YES / NO Postal Substation: YES / NO Weekly store traffic: Store hours:
Pkgs per month:
- ------------------------------------------------------------------------------------------------------------------------------
Directions to Store:
- ------------------------------------------------------------------------------------------------------------------------------
U-SHIP 4100 UNIT PLACEMENT SPECIFICATIONS
- ------------------------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Please mark (X) if specification has been met:
Dimensions: 43"(w) x 55"(h) x 31" (d)
|_| Phone: RJ11 wall-mounted phone jack, using a direct access phone line
|_| Power: 120 VAC; 15 amps; dedicated outlet
|_| Package drop-off within sight of the unit
|_| Unit not placed in direct sunlight
|_| Unit away from cart storage
|_| Unit not placed in extreme temperatures
|_| Area for overhead sign and shipping supplies
- ------------------------------------------------------------------------------------------------------------------------------
SHIPPING SUPPLIES
- ------------------------------------------------------------------------------------------------------------------------------
Please circle YES or NO to order shipping supplies
Are you interested in ordering
discount shipping supplies to If yes, a U-Ship representative will send you information on pricing and supplies
complement your UPS shipping services? offered.
- ------------------------------------------------------------------------------------------------------------------------------
PROMOTIONAL DESIGN DIMENSIONS
- ------------------------------------------------------------------------------------------------------------------------------
For promoting your U-Ship UPS Shipping Center you will be provided with two of the
[GRAPHIC OMITTED] following items.
Please circle your two choices:
a) One 44" x 30" two-sided directional sign
b) One 30" x 20" two-sided directional sign
c) One 6' x 3' outdoor/indoor banner
- ------------------------------------------------------------------------------------------------------------------------------
Authorized FOR OFFICE USE ONLY:
Signature: Site Number:
- ------------------------------------------------------------------------------------------------------------------------------
Title or Position: Shipper number:
- ------------------------------------------------------------------------------------------------------------------------------
Date: Installation Date:
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT D
ASC SITE SPECIFICATIONS
The following specifications must be met prior to a U-Ship ASC being installed
and training conducted at a Office Max/Copy Max location:
1. Analog telephone line installed and working; RJ11 wall-mounted
phone jack using a direct access phone line; Note, it does not
need to be a dedicated telephone line.
2. Electrical Power dedicated outlet to a 120 VAC; 15 amps
3. A dedicated package drop-off location within sight of the ASC unit
4. Location where ASC unit will not be placed in direct sunlight or
exposed to extreme temperatures
5. Area for overhead or wall mounted UPS/U-Ship sign
If one or more of the above specifications are not met prior to installation and
training, U-Ship shall have the right to bill Office Max/Copy Max at cost for
any incremental or excessive expenses incurred because of failure to meet this
specifications. These expenses may involve, but are not limited to, additional
travel expenses (including airfare, hotels, transportation and meals) additional
training (personnel) expenses and any unusual UPS charges. U-Ship's agreement
calls for training a site only once on a prearranged date. Additional training
expenses for not meeting the above specifications, will be the sole
responsibility of Office Max/Copy Max.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,493,645
<SECURITIES> 0
<RECEIVABLES> 137,892
<ALLOWANCES> 0
<INVENTORY> 904,618
<CURRENT-ASSETS> 2,621,419
<PP&E> 1,129,325
<DEPRECIATION> (311,411)
<TOTAL-ASSETS> 3,439,333
<CURRENT-LIABILITIES> 777,582
<BONDS> 71,542
0
0
<COMMON> 16,066
<OTHER-SE> 2,574,143
<TOTAL-LIABILITY-AND-EQUITY> 3,439,333
<SALES> 255,809
<TOTAL-REVENUES> 277,028
<CGS> 204,543
<TOTAL-COSTS> 204,543
<OTHER-EXPENSES> 557,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,097
<INCOME-PRETAX> (539,043)
<INCOME-TAX> 0
<INCOME-CONTINUING> (539,043)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (539,043)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
